BOFIT Weekly Review 2016/28
Russian state reduces stake in diamond giant Alrosa
In a secondary public offering (SPO), the government sold off mostly to Russian and European investors a 10.9 % stake in the diamond company. After the sale, the Russian state owns a third of Alrosa, the regional and local administration of Sakha Republic a third, with the remainder now freely traded. The divestment sale raised 52 billion rubles (€700 million) for the state coffers.
Alrosa has been on the privatisation list for years, i.e. a state-owned company in which the government plans to reduce its participation. Implementation of privatisation sales has been repeatedly postponed in recent years due to unfavourable market conditions. This year’s tight budget, however, seems to have speeded up the sales. Russia’s government estimates that selling off its stakes in various enterprises this year could provide as much as 1 trillion rubles to cover the budget deficit. In 2014 and 2015, income from privatisation sales amounted to a modest 7–8 billion rubles, as the government was reluctant to sell stakes in any large firms.
Deputy prime minister Shuvalov noted that this year’s planned sale of a 10.9 % stake in VTB Bank, at least, would still be postponed to next year. The decision to hold off on the sale may reflect the fact that VTB remains subject to EU and US financial sanctions. Shuvalov stated that the state plans this year sell off stakes in shipping company Sovkomflot and oil company Bashneft. The sale of a stake in Rosneft is also under discussion. The government is interested in finding strategic investors and Shuvalov does not rule out the possibility of selling Bashneft shares to Rosneft. The privatisation programme approved for 2014–2016 also seeks reductions in state participation in such firms as state airline Aeroflot, rail company RZD and pipeline operator Transneft, but they have not appeared much in sales discussions this year.
The role of state-owned enterprises in the Russian economy is significant and has even increased in recent years. SOEs provide about 30 % of all jobs and account for 40 % of the net sales of the country’s 600 largest firms.